UPDATE 2-Canada's long winter chills March retail sales

(Recasts with changes throughout)

By Louise Egan

OTTAWA, May 22 (Reuters) - Heavy snowfall in the late Canadian winter chilled retail sales growth in March but analysts still expect consumer spending to help keep the economy afloat in the first quarter.

Statistics Canada said on Thursday March retail sales grew by a meeker-than-expected 0.1 percent as gains in the heavyweight auto sector were partially offset by harsh winter conditions that kept shoppers away from clothing and general merchandise stores.

The median market forecast was for a 0.3 percent gain.

Excluding autos, sales were unchanged in March, again falling below expectations for a 0.5 percent increase.

However, the good news was that sales volumes actually rose 0.5 percent, indicating that price drops were to blame for the drop in value.

"The report is not as bad as it appears to be on first blush," said Derek Holt, economist at Scotia Capital.

"The retail sector was actually a positive contributor to real GDP growth in the month," he said.

Strong consumer spending has so far buoyed Canada's economy as the export side falters along with weakening U.S. demand.

Despite signs of slowing in February, a strong performance in January pushed first-quarter retail sales growth up by 1.8 percent, Statscan said.

In fact, quarterly sales of new vehicles grew at their fastest pace in a decade.

"There is little reason to believe that the Canadian consumer is hunkering down," said Stewart Hall, markets strategist at HSBC.

Economists surveyed by Reuters last month forecast, on average, first-quarter growth of 0.9 percent on an annualized basis. Some now believe it could come in lower than that but blame the slowdown on trade and manufacturing, not retail.

Statscan will release the quarterly gross domestic product numbers on May 30.

March sales in the automotive sector, which includes new and used vehicles and gasoline, rose 0.4 percent. Statscan said first-quarter sales of new vehicles rose 9.1 percent, the strongest rate in a decade.